The Future Of Digital Opportunities In Japan

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Online advertising in Japan is set to explode in the coming few years, in line with similar developments the world over. Research from PwC finds that the online advertising market in the country is expected to reach $11.15 billion by 2020 - by comparison, the US is expected to hit $93 billion, and China $45 billion in roughly the same timescale. As the Japanese market catches up, though, expect to see brands flock to an area of new opportunity for mobile engagement.

The growth of digital advertising in Japan is by no means at odds with developments across Asia-Pacific, and other markets in the region are catching up. According to Campaign, ‘internet advertising in Asia-Pacific grew 22.4% in 2015 to US$44.62 billion, and the region is now the second-largest globally after Europe, Middle East and Africa (EMEA).’ Where Japan formerly held 33% of the Asia-Pacific online ad spend, it now holds below 20%, a figure expected to fall even further to 13.4% in 2020. This is not to say that Japan’s growth is slowing, though, rather the region is becoming increasingly competitive around China’s undisputed dominance.

As Campaign note, 13.4% of the Asia-Pacific digital revenue is still a sizeable market, and the country is - albeit slightly belatedly - shifting towards becoming a digital first marketing environment. For the first time, this year will see a quarter of total media ad spending in Japan committed to digital, according to eMarketer. The change is happening rapidly, with this digital ad spend expected to nearly double in six years, from $7.85 billion in 2014 to $12.63 billion in 2020.

Mobile ad revenue is growing against desktop too, but slowly. Where in the US, mobile ad spending is expected to makeup 60.7% of all digital ad revenue, in Japan the figure will be closer to 33%, and the entire market itself is just a fraction of the size. The US is the undisputed world leader, though, and Japan’s market is still worthy of attention from brands looking to extend their reach. eMarketer predicts that mobile ad spend will jump from $4.57 billion this year to over double that by 2020 at $9.32 billion. Moving from 2016 to 2017, it is predicted that video advertising and banner advertising will see the biggest increases, with search advertising staying at roughly the same level and classified ads actually falling.

The reason for Japan’s growth is, in part, technology. According to Campaign, ‘Japanese media buying is becoming increasingly automated, with strong demand for programmatic technology.’ Programmatic advertising is sweeping the digital marketing world, and is being felt as strongly in Japan as in the US, where it has revolutionized the industry. With regard to display advertising, Campaign cite social media as a ‘key driver’ in its growth - the most prominent being Line, Twitter and Facebook - with banner ads far more popular than in the US or other dominant markets. By 2020, these type of ads alone are expected to be worth $3.42 billion.

Japan may be some way behind the US in terms of the scale of its digital advertising market, but it is following the same trend. Banner ads may be more popular in Japan than in the US, and search ads less so, but the growth both have already seen and predicted in the world’s third-largest economy is just as promising.